Sprint - Nextel 2007 Annual Report Download - page 99

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SPRINT NEXTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
decrease in the fair value of or the cash flows expected to be derived from the asset groups, or a significant
change in the extent or manner in which the assets in the group are utilized. A significant amount of judgment is
involved in determining the occurrence of an indicator of impairment that requires an evaluation of the
recoverability of our long-lived assets. If the total of the expected undiscounted future cash flows is less than the
carrying amount of our long-lived assets, a loss is recognized for the difference between the fair value and
carrying value of the assets. Impairment analyses, when performed, are based on our current business and
technology strategy, our views of growth rates for our business, anticipated future economic and regulatory
conditions and expected technological availability. See note 3 for additional information.
In addition to the analyses described above, we periodically assess certain assets that have not yet been
deployed in our business, including network equipment, cell site development costs, and software in
development, to determine if an impairment charge is required. Network equipment and cell site development
costs are impaired whenever events or changes in circumstances cause us to abandon such assets if they are no
longer needed to meet management’s strategic network plans. Software development costs are impaired when it
is no longer probable that the software project will be deployed. We also periodically assess network equipment
that has been removed from the network to determine if an impairment charge is required. If we continue to have
challenges retaining current iDEN subscribers and as we continue to assess the impact of rebanding the iDEN
network, management may abandon certain iDEN assets in future periods if we conclude that those assets will
either never be deployed or redeployed, in which case we would recognize a non-cash impairment charge that
could be material to our consolidated financial statements.
We adopted FASB Interpretation No. 47, or FIN 47, Accounting for Conditional Asset Retirement
Obligations, an interpretation of SFAS No. 143, Accounting for Asset Retirement Obligations, in the fourth
quarter 2005 resulting in a cumulative adjustment due to a change in accounting principle, after tax, of
$16 million. The adjustment was due to the recognition of asset retirement obligations primarily related to our
discontinued operations for environmental remediation requirements and contractual obligations for which
estimated settlement dates can be determined.
Intangible Assets
Goodwill and Other Indefinite Lived Intangibles
Goodwill represents the premium paid over the fair value of the net tangible and intangible assets we have
acquired in business combinations. We have also acquired several kinds of Federal Communications
Commission, or FCC, licenses, primarily through FCC auctions and business combinations, to deploy our
wireless services. We have identified our FCC licenses and our Sprint and Boost Mobile®trademarks as
indefinite lived intangible assets, in addition to our goodwill, after considering the expected use of the assets, the
regulatory and economic environment within which they are being used, and the effects of obsolescence on their
use. Refer to note 3 for additional description of our impairment testing policies for these assets.
Definite Lived Intangible Assets
Definite lived intangible assets consist primarily of customer relationships that are amortized over two to
five years using the sum of the years’ digits method, which we believe best reflects the estimated pattern in
which the economic benefits will be consumed. Other definite lived intangible assets primarily include certain
rights under affiliation agreements that we reacquired in connection with the acquisitions of the PCS Affiliates
and Nextel Partners, which are being amortized over the remaining terms of those affiliation agreements on a
straight-line basis, and the Nextel and Direct Connect®trade names, which are being amortized over ten years
F-14